Government VAT plan would encourage consumers to spend

Finance Minister Paschal Donohoe has said that while the package will 'be of sufficient scale' to address the impact of the Covid-19 pandemic in the short run, some firepower will have to be kept in reserve for the National Recovery Plan in October  Photo: Sam Boal/Rollingnews.ie

Reducing your hotel or restaurant bill through a targeted VAT reduction is to be a central part of the government’s July Stimulus Plan on Tuesday.

Government sources have confirmed that opposed to a flat VAT reduction, the plan is aimed at benefitting the consumer and encouraging them to spend, as opposed to acting as a crutch to the hotel sector.

It is understood that the totality of the package will be in excess of €5 billion and could be closer to €6 billion, but details are not yet finalised.

Given the presence of tax changes, sources have said the plan will take the form of a “mini-budget” and the Dáil has been placed on notice to be able to legislate for the proposed taxation changes.

“This will benefit the consumer, put the money in their pocket. They will see the impact on their bill as opposed to it benefitting the hotels as what happened before,” one senior source said.

Both Finance Minister Paschal Donohoe and Public Expenditure Minister Michael McGrath have said that while the package will “be of sufficient scale” to address the impact of the Covid-19 pandemic in the short run, some firepower will have to be kept in reserve for the National Recovery Plan in October.

Speaking to the Irish Examiner, Mr McGrath said: “A lot of progress has been made. The package when announced will be of sufficient scale and size to help get struggling businesses back on their feet and the economy going again.” 

Senior finance sources confirmed that the package is “largely finalised” and ministers can “have little reason for bitching”. 

With discussions due to continue throughout the weekend, it is understood the plan will also see an “enhanced restart grant” announced, beyond the original €10,000 sum announced back in March.

Minister for Public Expenditure Michael McGrath Photo: Niall Carson/PA Wire

Tánaiste Leo Varadkar said: “One thing I am working on is an enhanced restart grant, increasing the grant for many of the companies that have already received it and making sure that other companies that were not eligible can [obtain it] so when you do re-open hopefully in a few weeks’ time, you’ll have the money to do so.” 

Housing Minister Darragh O’Brien said the Covid-era freeze on rents and evictions will be extended from Monday, despite reported opposition to the measure from the Attorney General but said it would be a “relatively small” extension to the ban. 

He would not be drawn on how long an extension is envisaged. 

As previously revealed by the Irish Examiner there will be extensions to the Pandemic Unemployment Payment, the Temporary Wage Supplement Scheme and a further waiver of commercial rates until the end of the year at a cost of up to €560 million.